* FTSEurofirst 300 index rises 0.7 percent
* RBS jumps after announces job cuts
* Tesco falls after profit warning
By Joanne Frearson
LONDON, Jan 12 European shares rose on
Thursday after a Spanish government bond auction showed healthy
demand for peripheral euro zone debt.
Banks, which have been at the forefront of the region's debt
crisis due to their exposure to sovereign debts, were standout
gainers after the auction, with the STOXX Europe 600 Banks index
rising 2 percent.
Royal Bank of Scotland a top mover, up 7.1 percent,
was also buoyed by its announcement of 3,500 investment bank job
cuts and an exit from cash equities, corporate broking, equity
capital markets and mergers and acquisitions businesses.
Company earnings were more mixed, however, with retailer
Tesco the worst performer, down 14.6 percent, painting
a bleak picture about the economy and warning on profits.
Although the Spanish auction saw solid demand and borrowing
costs fell, traders said it was only the first of many
auction's, with Italy the next test of investors appetite for
debt on Friday.
"Spanish bond auction is important for market confidence as
it is the first test of investor risk appetite for debt, which
is needed to push the market higher," said Joshua Raymond, Chief
Market Strategist at City Index.
"But, Italy will be another main event."
Colin McLean, managing director of SVM Asset Management said
he was starting to become more positive on the banking sector
due to the ECB offering them cheap money.
"Things seem to be improving for the banks and the ECB seems
to be doing enough to keep the pressure off the sector's funding
concerns. There is a case now for investing in banks that do not
need further funding," McLean said.
Traders were also hoping the European Central Bank news
conference on Thursday with President Mario Draghi could give
some signs of how the bank might use its balance sheet to prop
up growth in the region.
"Investors will be looking for more words from Draghi of the
tone of the ECB, market still wants more rate cuts and a more
aggressive stance towards sovereign debt and buying bonds," said
Long-term investors are still wary about fallout from the
euro zone debt crisis as senior European bankers have said talks
with private sector creditors over contributions to a second
Greek bailout are going badly. This raises prospects that
governments will have to increase their contribution to the aid
At 1012 GMT, the FTSEurofirst 300 index of top
European shares was up 0.7 percent at 1,029.02 points after
falling 0.5 percent in the previous session.